Callum McGoldrick: Labour’s raid on motorists

Callum McGoldrick is investigations campaign manager at the Taxpayers’ Alliance.

As fashionable as it is to write off the last government’s time in office as a disaster, we shouldn’t be too hasty in dismissing some of its more successful policies. Particularly as these are the ones Labour have been quickest to undo. 

The most glaring example of this is education. Michael Gove’s reforms of the system included taking control away from local authorities through the academy model, promoting exams over coursework and incentivising schools to focus on more traditional subjects. Between the 2009 baseline and the 2022 PISA results, England rose from 27th to 11th in the world for mathematics, and from 25th to 13th for reading.

Under Bridget Phillipson, Labour is removing the traditional subject focus in favour of creative arts and sports, scrapping single word Ofsted judgements for a softer system and scaling back the autonomy of academies. This is before even mentioning the dismantling of private schools. The Conservative legacy on education policy is being shredded.

Then there is welfare. Sir Iain Duncan Smith drove a massive overhaul to the benefits system through Universal Credit (UC) during the coalition years. Removing many of the cliff-edges of the old system for those starting to get into work, UC did mean that those that worked would earn more. Although it came in later, the Two-Child Limit restricted those on UC from receiving further taxpayer funding for having more than two children. Employment increased, and benefits spending was brought under control, at least until the pandemic undid much of the work.

Labour were elected with a promise to ‘make work pay’ with a whole host of benefit reforms. The early days of their government even saw tentative statements indicating a reduction in at least the growth rate of overall welfare spending. In a surprise to no one, the plans collapsed. The Two-Child Limit will be scrapped from next month, the standard allowance will be raised and they are reducing the amount the government can deduct from UC for debt deductions from 25 per cent to 15 per cent, further burdening those in work who must subsidise the debts of those out of work. The unwinding of this success in welfare started under the last government, but it has been accelerated since.

This brings us to fuel duty, surely one of the major Conservative successes in tax policy. From 1993, the duty had risen by 3 per cent above the inflation, later increased to 6 per cent in 1997. In this time, Britain went from having some of the lowest fuel costs in the world to among the highest. By 2000, over 80 per cent of the cost of petrol was tax alone.

Following huge protests in 2000, Gordon Brown cut fuel duty by 2p in 2001 on specific types of petrol and diesel while largely avoiding further rises until 2008. Alistair Darling increased the duty by 2p in 2009 while legislating for a schedule of aggressive tax hikes. A 1p per litre increase in April 2010, another 1p in October 2010, and a commitment to raise duty by 1p above inflation every single year from 2010 to 2014.

The 2010 election saw George Osborne become Chancellor. While he followed through with Darling’s scheduled increases in his first year in office, after petrol prices hit record highs in 2011, the Conservatives brought in a freeze. Since that freeze, no chancellor had increased fuel duty. In 2022 there was even an emergency 5p per litre cut in response to the Ukraine crisis which has further stayed in place to the present day. Had the old system stayed in place, motorists would be paying £19 billion more per year with a rate of over £1 per litre, according to the Institute of Fiscal Studies. From some of the highest rates in Europe, the Conservative government successfully brought us down to only slightly above average.

The prime minister insisted this week at PMQs that fuel duty has not increased under Labour. This was gaslighting. The freeze is set to end in September in order to pay for the benefits bill, bloated public sector and various other squanderings of taxpayers money.

Our latest research note at the TaxPayers’ Alliance shows just and how much it could undo some of the work of the past 15 years. Even with a decade and a half of freezes Britain already still has the fourth highest duty on diesel and the tenth highest duty on petrol when compared with EU member states. We pay 3p more per litre more than the EU average on petrol and 12p per litre more on diesel. If the 5p cut alone is removed, this gap would widen to 8p per litre above the EU average for petrol and 14p per litre above the EU average for diesel.

The Conservatives in opposition are demanding an extension to this cut. And rightly so. As well as protecting motorists and the wider economy, it is one of the rare bright spots in tax policy from the last government that is left to defend.